It’s not an easy time to be a home builder. You might think they’d be happy as clams, with the region’s demand for housing unbelievably high and home prices at astronomical levels. But some critical shortages are making it difficult to get homes built these days.
“If I wanted to describe today’s market in one word, that word would be ’stress,’” says Victor Furnells, regional sales director at Hanley Wood Market Intelligence.
Builders face shortages of labor, land and time.
“Home builders are telling us right now that they cannot find enough people to pour concrete and hammer nails,” Mr. Furnells says. “I was speaking with a construction supervisor recently in Prince William County. He told me that the main problem is finding good people, experienced people who can lead others. Day laborers are a dime a dozen, but what this supervisor can’t find is good foremen, folks with enough experience to oversee construction.”
Talented workers are in such demand that builders are stealing them from one another, enticing them to leave their jobs for more pay or other benefits.
“And the problem with that is whenever someone leaves a company, it puts a kink in the delivery timeline,” Mr. Furnells says. “It slows things down further.”
According to Hanley Wood’s data, 12 to 16 months is how long most buyers have to wait to see their new home finished. That’s stunning, considering that a few years ago, buyers were complaining about waiting six to nine months.
“I signed a contract for a new home in Damascus, Maryland, in December 2002 and didn’t move in until January 2004,” Mr. Furnells says. “That’s pretty typical these days.”
Builders are also being slowed by local governments.
Some rural counties are slowing down the process so they can work on the infrastructure new residents will need — teachers, policemen and firefighters. “Entitlement” is a word used by industry insiders to name the process by which a city or county receives the builder’s construction plans, reviews them and grants approval to begin work. “Here’s an example of what bogs down the entitlement process,” Mr. Furnells says. “Prince George’s County recently imposed a rule that requires any new subdivision to pass a 911 test. If an emergency call is made from the proposed construction site, it must be answered by a police officer, ambulance or fire truck within a specific number of minutes.”
If the test fails, construction is halted until emergency services are expanded or redirected to accommodate the new residents. Delays such as this can prevent construction for quite some time.
Another frustration builders face is the lack of land, which is forcing them to do two things: build farther away and build higher.
Many builders today are seeking available acreage in distant counties such as Virginia’s Orange, Delaware’s Sussex and West Virginia’s Jefferson.
“There is an incredible amount of builder interest these days in Maryland’s Eastern Shore and places like Sussex County, Delaware,” Mr. Furnells says.
Some 3,500 new homes were built in Sussex County last year, up 139 percent compared with a decade ago. In that same period, new-home sales in Montgomery County fell by 50 percent.
“Sussex County is a pretty substantial market these days,” says Brenda Desjardins, president of New Home Marketing Services. “And I can tell you one reason why: I just got my tax bill for my waterfront property in Sussex County. It was $297 — for the entire year.”
Ms. Desjardins says about three-quarters of Sussex County home buyers are retirees or people nearing retirement.
“None of these people need schools or a high level of social services,” she says. “And most of the policing and road maintenance are provided by the state, so the county can have very low property taxes.”
Low property taxes are surely attractive to anyone living inside the Beltway, but are any of those people willing to move 90 miles east of Annapolis?
“It’s simple economics,” Ms. Desjardins says. “Fundamentally, people will continue to buy homes based on their needs and their dreams. Many of the outer regions are popular because when people spend half a million dollars, they have certain expectations. Many buyers expect to get a big lot and a two-car garage for that kind of money.”
Of course, half a million dollars won’t even buy a town home in many Washington-area neighborhoods these days, which is one reason condo sales are so strong now.
“There was a time when buyers thought of a condo as a steppingstone, just a temporary purchase that would lead to something larger, something detached,” Ms. Desjardins says.
“I’m not sure people look at them that way anymore,” she says. “A lot of people buying condos in Bethesda and the District are choosing to stay in their condo because it is a lifestyle choice, not just an investment on the road to a single-family home.”
It’s fortunate that there is a market for condominiums today because builders can’t put up much else, particularly in Northern Virginia. In Arlington, Alexandria and Fairfax, condominium construction far outstrips that of town homes and single-family homes.
“The National Association of Home Builders is saying that it’s time to build up, it’s time to build condos,” Mr. Furnells says. “Many metropolitan areas are dealing with land shortages like ours, but there’s also the baby boomer generation that is retiring. Many aren’t moving to Florida. They want to stay near the grandchildren, and they have enough money to buy what they want. Many want to live in a college town, close to public transport with lots to do.”
The demand for condos is behind this year’s increase in home sales. Sales of single-family homes in places such as Prince William and Loudoun counties are down compared with several years ago, when those counties were booming.
Now, it’s condo sales in Alexandria that are on the rise.
Overall new-home sales in Alexandria are up 113 percent this year.
None of those home sales was a single-family home.
Only 64 were town homes.
The remaining 588 were condominiums, which sold for a median base price of $301,990 — up 23 percent over 2004.
The District is experiencing the same thing: There were 350 new home sales in Washington in the first four months of the year, an increase of 285 percent over the same period last year.
Once again, none of those homes was a single-family property; there just isn’t much land inside the Beltway for detached construction.
All but 10 of the District’s 350 new-home sales have been condos this year, selling for a median base price of $532,140.
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